Case Note & Summary
The matter involved two writ petitions before the Bombay High Court challenging the constitutional validity of Section 13(8)(b) and Section 8(2) of the Integrated Goods and Services Tax Act, 2017. The first petitioner, a proprietary firm, provided marketing and promotion services to foreign customers, receiving commission in convertible foreign exchange. The second petitioner, a company, acted as a selling agent for foreign principals in textile engineering and other domains, similarly earning commission from foreign principals. Both petitioners contended that their services were export of services, consumed outside India by overseas clients, and therefore should not be subject to Indian GST. However, under Section 13(8)(b) of the IGST Act, the place of supply for intermediary services was deemed to be the location of the supplier in India, making the petitioners liable to CGST and MGST. The petitioners paid GST under protest and sought a declaration that the provisions were ultra vires the Constitution and beyond legislative competence. A Division Bench of the High Court heard the petitions; one judge struck down Section 13(8)(b) as ultra vires and unconstitutional, while the other judge upheld its validity, resulting in a difference of opinion. By order dated 16 June 2021, the Division Bench recorded the split and directed the Registry to place the matters before the Chief Justice, who referred the proceedings to a third judge for opinion. The judgment available up to paragraph 11 sets out the factual background and the referral order but does not include the final analysis or decision. The petitioners argued that their transactions were export of services outside the purview of CGST and MGST, while the impugned provisions subjected intermediary services to GST despite foreign exchange earnings. The legal issues involve the constitutionality of the impugned sections, legislative competence under Article 269A, and alleged violation of fundamental and constitutional rights including Articles 14, 19, 245, 246, 246A, 248, 265, 269A and 286. The available text does not present the respondents' arguments or the court's final reasoning and operative directions.
Headnote
A) Goods and Services Tax - Intermediary Services and Place of Supply - Section 13(8)(b) Integrated Goods and Services Tax Act, 2017 - Constitutional Validity - Petitioners challenged Section 13(8)(b) as it deemed the place of supply of intermediary services to be the location of the supplier in India, subjecting export-oriented intermediary services to GST. The Division Bench split on constitutionality; one judge held it ultra vires and unconstitutional, the other upheld it. The matter was referred to a third judge for opinion (Paras 2-3).
B) Goods and Services Tax - Export of Services - Sections 8(2), 13(8)(b) Integrated Goods and Services Tax Act, 2017 - Petitioners' Business Model - Petitioners provided marketing and promotion services to foreign principals, receiving commission in foreign exchange; petitioners contended these were export of services outside CGST/MGST and paid tax under protest (Paras 6-10).
Issue of Consideration
Whether Section 13(8)(b) and Section 8(2) of the Integrated Goods and Services Tax Act, 2017 are constitutionally valid and within the legislative competence of Parliament; whether intermediary services provided to overseas principals constitute export of services and fall outside the purview of CGST/MGST; whether the impugned provisions violate Articles 14, 19, 245, 246, 246A, 248, 265, 269A and 286 of the Constitution.
Law Points
- Constitutionality of Section 13(8)(b) IGST Act
- intermediary services place of supply
- export of services
- legislative competence under Article 269A
- Articles 14
- 19
- 245
- 246
- 246A
- 248
- 265
- 269A
- 286 of the Constitution
Case Details
2023 LawText (BOM) (04) 42
Writ Petition No.2031 of 2018 and Writ Petition (L.) No.639 of 2020
Bharat Raichandani, Rishabh Jain, Abhishek Rastogi, Pratyushprawa Saha, Mahir Chablani, Kanika Sharma, Marmik Kamdar, Anil C. Singh, Pradeep Jetly, J.B. Mishra, Aditya Thakkar, Dhananjay B. Deshmukh, Jyoti Chavan, Dushyant Kumar
Dharmendra M. Jani and A.T.E. Enterprises Private Limited
Union of India and Others
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Nature of Litigation
Constitutional challenge to provisions of IGST Act relating to intermediary services and export of services.
Remedy Sought
Declaration that Sections 13(8)(b) and 8(2) of the IGST Act are unconstitutional and ultra vires; writ of mandamus staying implementation and ad-interim reliefs.
Filing Reason
Petitioners provided marketing and promotion services to overseas customers for commission in foreign exchange; they contended such services were export of services outside the purview of CGST/MGST, but Section 13(8)(b) deemed the place of supply of intermediary services as the location of the supplier, making them liable to GST; they paid tax under protest and challenged the provisions.
Previous Decisions
Division Bench of Bombay High Court heard the writ petitions; one judge (Justice Ujjal Bhuyan) struck down Section 13(8)(b) as ultra vires and unconstitutional, another judge (Justice Abhay Ahuja) upheld validity; due to difference of opinion, by order dated 16 June 2021, the Bench referred the matter to the Chief Justice for placing before a third judge.
Issues
Whether Section 13(8)(b) of the IGST Act is constitutionally valid and within the legislative competence of Parliament.
Whether Section 8(2) of the IGST Act is constitutionally valid.
Whether services provided by the petitioners to overseas principals constitute export of services and fall outside the purview of CGST/MGST.
Whether the impugned provisions violate Articles 14, 19, 245, 246, 246A, 248, 265, 269A and 286 of the Constitution.
Submissions/Arguments
Petitioners contended that their transactions were export of services as services were consumed and used by overseas clients outside India, earning foreign exchange, and therefore outside CGST/MGST; they paid GST under protest and challenged the provisions.
Judgment Excerpts
The petitioners in both the petitions primarily challenge the constitutional validity of the provisions of Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017.
There is difference of opinion in the Bench. Matters relate to constitutionality of section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017.
The petitioner has contended that the nature of the transaction(s) entered by the petitioner with its overseas customers are transactions of 'export of services', as the petitioner was providing services to its overseas clients, which were consumed and used by the overseas clients outside India, for which valuable foreign exchange was earned by the country.
Procedural History
The writ petitions were filed before the Bombay High Court; a Division Bench comprising Justice Ujjal Bhuyan and Justice Abhay Ahuja heard them and delivered differing opinions on the constitutionality of Section 13(8)(b) IGST Act; by order dated 16 June 2021, the Division Bench recorded the difference and directed the Registry to place the matters before the Hon'ble Chief Justice; the Chief Justice referred the proceedings to a third judge (G.S. Kulkarni, J.) for opinion; judgment was delivered on 18 April 2023.
Acts & Sections
- Integrated Goods and Services Tax Act, 2017 (IGST Act): Section 8(2), Section 13(8)(b)
- Central Goods and Services Tax Act, 2017 (CGST Act):
- Maharashtra Goods and Services Tax Act, 2017 (MGST Act):
- Constitution of India: Article 14, Article 19, Article 245, Article 246, Article 246A, Article 248, Article 265, Article 268A, Article 269A, Article 286, Article 302
- Companies Act, 1956:
